Summary
Autodesk's fiscal 2011 second quarter showed broad improvement. Revenue was $472.8 million, up 14.0% from the prior-year quarter. Gross profit was $424.4 million, up 16.3%. Operating income was $79.8 million, up 2855.6%. Net income was $59.9 million, up 470.5%. Diluted EPS was $0.25, up 400.0%. Gross margin was 89.8%, up 1.8 percentage points. Operating margin was 16.9%, up 16.2 percentage points. For the first six months, revenue was $947.4 million, up 12.7%. Gross profit was $847.7 million, up 14.8%. Operating income was $130.6 million, up 877.4%. Net income swung to a profit of $96.8 million, up 546.1%. Diluted EPS swung to a profit of $0.41, up 555.6%. Gross margin was 89.5%, up 1.7 percentage points. Operating margin was 13.8%, up 15.8 percentage points. Operating cash flow was $111.5 million in the quarter, up 135.7%, and $250.6 million for the six months, up 236.4%. Capital expenditures were $5.3 million in the quarter, down 50.5%, and $11.1 million for the six months, down 54.3%. Deferred revenue was $454.2 million, up 7.0%.
Revenue growth came from all major geographies and segments. PSEB revenue rose 19%, AEC rose 8%, Manufacturing rose 18%, and Media and Entertainment rose 6%. The Americas grew 6%, EMEA grew 20%, and Asia Pacific grew 17%. License and other revenue increased 22%, while maintenance revenue increased 4%. Commercial new seat revenue jumped 46%. Upgrade revenue fell 31%. Model-based design products revenue increased 14% and represented 29% of total revenue. Emerging economies revenue increased 13% and represented 15% of net revenue. Maintenance program enrollment was about 2.6 million users at July 31, 2010, up from 2.2 million at January 31, 2010. Backlog was $547.5 million at July 31, 2010, compared with $542.5 million at January 31, 2010. Deferred revenue within backlog was $526.1 million, compared with $516.5 million. The deferred revenue balance included $472.7 million of customer maintenance contracts. Non-GAAP net income was $85.0 million, and non-GAAP diluted EPS was $0.36. Non-GAAP operating margin was 25%.
Operating expenses decreased 5% in the quarter and six months. Total spend was $393.0 million in the quarter and $816.8 million for the six months. Restructuring charges were $1.9 million in the quarter and $9.0 million for the six months, down from $26.4 million and $42.9 million in the prior-year periods. The company reduced headcount by about 50 positions in the quarter and 170 positions in the six months. Cash and marketable securities were $1,270.7 million at July 31, 2010, up from $1,126.2 million at January 31, 2010. Days sales outstanding was 44 days, down from 55 days. The effective tax rate was 25% for the quarter and 24% for the six months. Autodesk repurchased 2.5 million shares for $70.4 million in the quarter and 4.5 million shares for $129.2 million in the six months. It had no repurchases in the prior-year periods. The company had a $250.0 million line of credit with no borrowings outstanding.
Management expects to grow revenue and increase operating margin percentage in the third quarter of fiscal 2011 compared with the third quarter of fiscal 2010. For fiscal 2011, the company expects restructuring charges of approximately $10.0 million to $12.0 million. It also expects net cash flows from operating activities to be higher in the third quarter of fiscal 2011 than in the same period of the prior year. Risks include mixed global macroeconomic indicators, high unemployment in several important geographies including the U.S., uncertainty about credit availability, and foreign exchange fluctuations. Autodesk relies on major distributors and resellers. Tech Data accounted for 15% and 16% of consolidated net revenue for the three and six months ended July 31, 2010. International net revenue was 71% and 72% of net revenue. Emerging economies represented 15% of net revenue. The company faces product returns risk, potential additional restructuring, goodwill impairment, and tax rate changes. It had $182.5 million of gross unrecognized tax benefits. The restructuring plan may not achieve its goals, and revenue growth may not be sustainable.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2011 | Q1 FY2011 | QoQ | Q2 FY2010 | YoY |
|---|---|---|---|---|---|
| Revenue | $472.8M | $474.6M | -0.4% | $425.8M | +11.0% |
| Gross profit | $424.4M | $423.3M | +0.3% | $373.5M | +13.6% |
| Gross margin | 89.8% | 89.2% | +0.6 pp | 87.7% | +2.0 pp |
| Research & development | $119.3M | $127.2M | -6.2% | $124.1M | -3.9% |
| Sales & marketing | $177.5M | $186.5M | -4.8% | $185.8M | -4.5% |
| General & administrative | $45.9M | $51.7M | -11.2% | $45.5M | +0.9% |
| Total operating expenses | $344.6M | $372.5M | -7.5% | $392.9M | -12.3% |
| Operating income (loss) | $79.8M | $50.8M | +57.1% | -$19.4M | +511.3% |
| Operating margin | 16.9% | 10.7% | +6.2 pp | -4.6% | +21.4 pp |
| Net income (loss) | $59.9M | $36.9M | +62.3% | -$32.1M | +286.6% |
| Net margin | 12.7% | 7.8% | +4.9 pp | -7.5% | +20.2 pp |
| Diluted EPS | $0.25 | $0.16 | +$0.09 | -$0.14 | +$0.39 |
Risks
Weak global economic conditions and a mixed recovery may continue to impact demand. MD&A notes global demand improved but says it is not clear whether increases represent sustainable trends, and unemployment remains high in several important geographies including the U.S.
A significant portion of revenue is maintenance revenue, and customers have no obligation to renew. MD&A says net maintenance billings increased 6% and 17% in the three and six months ended July 31, 2010, but year over year decreases in net maintenance billings during the second and third quarters of fiscal 2010 could cause downward pressure on future maintenance revenue.
Indirect channel sales were approximately 85% of revenue for the three and six months ended July 31, 2010. Tech Data accounted for 15% and 16% of consolidated net revenue for those periods, and distributor insolvency or reduced sell-through could harm revenue.
AutoCAD and AutoCAD LT combined represented 34% and 35% of consolidated net revenue for the three and six months ended July 31, 2010. Any factor adversely affecting sales of these products would likely harm operating results.
International net revenue represented 71% and 72% of net revenue for the three and six months ended July 31, 2010. Risks include regulatory changes, currency, intellectual property protection, collections, and taxation; emerging economies growth was 13% and 14% but conducting business there presents challenges.
Revenue benefited from favorable foreign exchange rate changes in the three and six months ended July 31, 2010, but on a constant currency basis net revenue would have increased 13% and 10%, respectively, versus reported 14% and 13%. Operating expenses increased due to foreign exchange in the six months.
The company initiated a Fiscal 2011 restructuring plan expected to reduce 210 to 230 positions and record $10.0 million to $12.0 million in charges. MD&A says if revenue declines or does not grow as planned, it may further reduce operating expenses, including additional restructuring, which could negatively impact net income and cash flows.
The investment portfolio includes $10.0 million in The Reserve International Liquidity Fund that ceased redemptions and $7.6 million in auction rate securities that failed to settle in auctions since August 2007. Illiquidity or impairment could reduce interest income and liquidity.
The software industry has limited barriers to entry and competitors in certain markets have greater financial, technical, sales and marketing resources. Increased competition could result in price reductions, reduced net revenue and profit margins, and loss of market share.
Growth strategy depends on expanding AutoCAD and AutoCAD LT customers to vertical design and model-based design products. If sales of AutoCAD and AutoCAD LT decrease without corresponding increases in these products, results of operations will be adversely affected.
The effective tax rate was 25% and 24% for the three and six months ended July 31, 2010. Tax positions may be challenged, and changes in accounting or tax rules, including potential IFRS adoption, could materially affect financial results.
Litigation and regulatory inquiries have increased as the global economy changed and the business evolved. Claims or regulatory actions could result in costly defense, damage awards, injunctive relief, fines, or changes to business practices.
The company regularly acquires or invests in businesses, and risks include integration challenges, failure to realize revenue and cost projections, and diversion of management. Acquisitions may negatively impact operating margins.
A $21.0 million goodwill impairment was recorded in the M&E segment during the first quarter of fiscal 2010. If revenue and cash flow projections decline significantly in the future, additional impairment charges may be recorded.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Net maintenance billings
Total Program Enrollment
Summary, forecast, risks and KPIs are extracted from Autodesk, Inc.'s SEC filings for Q2 FY2011 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 15, 2026.